Vietnam: Regulation on analysis for the purpose of comparison between related party transactions and arm’s length transactions of enterprises

According to Clause 2 Article 6 of the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, analysis for the purpose of comparison between related party transactions and arm’s length transactions are specified as follows:

- Data on and the reality of transactions between related parties that constitute the basis for comparing contracts, written credentials, agreements and economic, commercial and financial relationships in taxpayers’ related transactions with business decisions may be accepted by independent parties under the same or similar conditions. According to the principle of comparison applied in the comparability analysis, the substance and reality of business and risks incurred by related parties shall outweigh written agreements;

- Comparability analysis must ensure the comparability between enterprises performing arm’s length transactions and those performing related party transactions, or between arm’s length transactions and related party transactions, and none of extrinsic factors causing material impacts on levels of price, profit margins or ratios of profit split between parties. In case where there exists any extrinsic factor causing material impacts on the level of price, profit margin or profit split ratio, it shall be obligatory to analyze, determine, correct and eliminate these factors based on the comparison of the factors referred to in Article 7 and 10 herein, and ensure the comparability analysis is conformable to specific transfer pricing methods prescribed in Article 13, 14 and 15 herein.

View more details at the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, effective from December 20, 2020.

Thuy Tram

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